Merkel wants more centralized power for Germany and France with Ireland agreeing to give up more sovereignty on issues such as tax policy.

Kenny knows however, that will not fly with the Irish electorate

As Merkel battles to save the Euro, Kenny insisted he will preserve Ireland’s status as the nation best placed to survive of all the bail-out countries.

Kenny insisted that Ireland will only support her ideas while it keeps control of its tax policies – including the controversial corporate tax rate – and regains its economic sovereignty at the end of the bail-out programme.

He also warned Merkel that changing the European Union’s treaties, as she has proposed, will not stop the financial panic spreading across the globe on the back of the Euro’s problems.

The Fine Gael leader stressed at a post-meeting press conference that Merkel must utilize the European Central Bank’s strength to ‘stop the contagion’.

Merkel had told the press conference that she believes countries who break the bail-out rules must be taken to the European Court of Justice and be fined.

In response, Kenny highlighted that Ireland ‘knew all about sticks and carrots being in the middle of a bail-out programme that requires us to have the budget approved by the Troika’.

He argued that the necessary rules are already in place and reminded Merkel that ‘Ireland has put in place an independent fiscal council’ that will oversee budget decisions.

Kenny insisted: “Any moves to change the treaties will be very challenging. We recognise the need for stronger budgetary discipline; we recognise the need for fiscal responsibility.

“While there are strong rules needed here, any steps towards major treaty change would obviously be very challenging.

“I’ve had a frank discussion about that with the chancellor. And I believe that the immediate crisis has to be dealt with in the short term with the facilities and tools that are available to us.”

The Irish PM also stated that his government is preparing to legislate for a debt break that would make it illegal for the state to rack up debt and deficits.

He then advised Merkel to ‘wait and see’ what proposals for Treaty change EU President Herman Van Rompuy comes up with for their December summit before the Germans move to change EU treaties.

Kenny has also turned down a meeting to discuss the Eurozone crisis with French President Nicolas Sarkozy as it clashes with a gathering to be attended by leaders from Ireland, Britain, Northern Ireland, Wales, Scotland, the Isle of Man, Jersey and Guernsey.

Government officials are now trying to find an alternative date for the French meeting.